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OFCCP’s Guidance on AI & Compliance Best Practices

President Biden issued Executive Order 14110 in October of 2023, which called for U.S. government agencies to publish guidance for federal contractors on the use of AI relating to nondiscrimination in employment decisions.

As mentioned in an earlier post, the OFCCP recently published guidance titled “Artificial Intelligence and Equal Employment Opportunity for federal contractors.” The guidance clarifies federal contractors’ compliance obligations with the use of AI and automated decision-making technologies. 

HR Works has summarized the key highlights of the guidance below and encourages federal contractors to review these key concepts and best practices to ensure that their use of AI in employment processes aligns with recommended guidelines, thereby reducing adverse impact and promoting fair and equitable practices. 

OFCCP Guidance Key Highlights

Definition of Key Terms

  • Artificial Intelligence (AI): The guidance defines AI similarly to the National Artificial Intelligence Initiative Act of 2020, defining it as “a machine-based system that can, for a given set of human-defined objectives, make predictions, recommendations, or decisions influencing real or virtual environments.”
  • Algorithm: The guidance uses the EEOC’s definition of algorithm as a “set of instructions that can be followed by a computer to accomplish some end.”
  • Automated Systems: The guidance further defines “automated systems” as “broadly describing software and algorithmic processes, including AI, that are used to automate workflows and help people complete tasks or make decisions.” The guidance points to examples of automated systems that sift through resumes and identify qualified applicants or AI that determines “which criteria to use when making employment decisions,” such as “to define the parameters by which the resumes are filtered and reviewed.”

Production and Recordkeeping

The OFCCP guidance clarifies that federal contractors’ production and recordkeeping compliance obligations extend to their use of AI and automated systems. The guidance states that federal contractors must:

  • Maintain and ensure confidentiality of records, such as keeping records of resume searches that include the substantive search criteria used.
  • Cooperate with OFCCP by providing the requested information on their AI systems.

Reasonable Accommodations

The guidance clarifies that federal contractors’ obligations to provide reasonable accommodations extend to their use of AI and automated systems, including electronic job application systems.  

Selection Procedures

The guidance clarifies that if any AI or automated technology is used in selection procedures, the federal contractor must ensure the system meets applicable OFCCP-enforced nondiscrimination laws and the Uniform Guidelines on Employee Selection Procedures (UGESP).

Regarding UGESP, if a selection procedure harms hiring people from protected classes, it’s considered discriminatory UNLESS the employer can prove it’s a necessary part of the job and there’s no better way to do it. There are two main ways employers can show their selection procedures are job-related:

  1. Validation: There are three (3) main approaches to validation: (1) content validation, (2) criterion-related validation, and (3) construct validation. Evidence of the validity of a selection procedure by a content validity study consists of data showing that the content of the selection procedure is representative of important aspects of performance on the job for which candidates are to be evaluated. Criterion-related validation of a selection procedure consists of empirical data demonstrating that the selection procedure is predictive of or significantly correlated with important elements of job performance (criteria). Construct validation of a selection procedure consists of data showing that the procedure measures the degree to which candidates have identifiable characteristics which have been determined to be important in successful performance in the job for which the candidates are to be evaluated.
  2. Job Analysis: This involves carefully defining the skills and knowledge needed for the job, and ensuring the selection procedure measures those specific qualities.

Use of Third-Party AI Vendors

The guidance clarifies that the OFCCP will hold federal contractors accountable for complying with their nondiscrimination and affirmative action obligations, regardless of whether they use an AI or automated system or whether such technologies are provided by or used by third-party vendors or contractors.  The guidance states that federal contractors cannot delegate their nondiscrimination and affirmative action obligations to third-party vendors and that the compliance risks and obligations remain with the contractor utilizing the technology.

When using AI vendors, federal contracts should be able to verify:

  • Provisions of vendor contracts requiring maintenance of necessary records consistent with OFCCP regulation requirements and access to applicable records;
  • The source and quality of information collected, used as background, or analyzed by AI systems;
  • Whether the vendor documents and maintains the data used in algorithms and the rationale for why the vendor used the data points;
  • “The vendor’s protections and privacy policy on data provided by the contractor”; and
  • “Critical information about the vendor’s algorithmic decision-making employment tool, e.g., captured data, scoring system, and the basis for selection or elimination of applicants/candidates.”

The OFCCP will investigate the use of AI during compliance evaluations and complaint investigations to determine whether a federal contractor complies with its nondiscrimination obligations. The Agency has added item 21 in the current compliance review itemized scheduling letter, which requests information about any artificial intelligence, machine learning, automated systems, or other technology-based selection procedures.

To help ensure compliance with OFCCP’s guidance, the following best practices are recommended:

Compliance Best Practices

Transparency & Notices

  • The OFCCP recommends employers provide clear and accessible notice to applicants and employees about their use of AI in the decision-making process. This includes explaining what data is collected, how AI is used, and how individuals can challenge AI-based decisions.

Third-Party Vendors:

  • Thoroughly vet any third-party vendors, specifically inquire about:
    • The data used for training (and any potential bias in those data).
    • The algorithm’s validity in predicting job performance; ask to see assessment reports and historical selection rates based on the applicable laws and federal guidelines.
    • An understanding of how the algorithm works.
    • Contract provisions for maintaining accessible records and strong data privacy measures that comply with OFCCP regulations.

Internal Training & Governance

  • Provide training to any staff who will be touching AI systems, such as HR and IT professionals. In general, contractors need to set up an internal governance program to monitor and manage their AI systems.
  • Maintain documentation of AI validation processes and steps taken to ensure fair and unbiased decision-making is crucial for demonstrating compliance during an OFCCP audit.
  • Consider an independent third-party audit before using an AI tool (i.e., Holistic AI, credo AI).
  • Consider other state and local laws as well as other federal guidelines such as EEO and FLSA.

Artificial intelligence is a broad field that continues to expand daily. To understand the level of risk associated with using a certain tool, consider the potential scale of impact it could have. To avoid discrimination claims, avoid using AI to replace processes. AI systems, while powerful, lack the nuanced understanding and contextual awareness that human employees bring to the table. Human judgment is critical in making decisions to reduce biases and disparate impact; catch errors; and ensure adherence to various federal, state, and local laws and regulations.

HR Works, headquartered in Upstate New York, is a human resource management outsourcing and consulting firm serving clients throughout the United States for over thirty years. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.